Am I seeing things, or does it look like we are bottoming? I know yesterday (Thursday) was a mess, and Greece is a constant issue, but we hit the bottom last week right around the options expiration. The Morgan Stanley Cyclical Index (CYC) has picked up since then, while the Consumer Index (CMR) has lagged.
Brief flurry of activity in Italian banks this morning, as UniCredit and Intesa Sanpaolo were briefly halted in Italy on concerns that they may have significant exposure to Greece, or may not pass stress tests and may be forced to raise more capital. Both of these are not unreasonable concerns. UniCredit down 3 percent in Italy.
1) Russell rebalancing today. Once a year, typically on the last Friday in June, the Russell indexes rebalance. The Russell indexes are market cap weighted, but those weightings are adjusted yearly only on this one day. There is migration to and from the Russell 1000 (large cap index) and to and from the Russell 2000 (small cap index) as some companies have increased or decreased their market cap and migrate into a different index. The cutoff last year for inclusion in the Russell 1000, for example, was a market cap of $1.7 billion, and $112 million for the Russell 2000.
Index managers who are directly or indirectly tracking the Russell indexes will need to rebalance their portfolios at the end of the day, which always causes a spike in trading activity near the close. During the rebalancing at this time last year, about 7.5 billion shares were executed just in NYSE-listed stocks, 50 percent higher than the daily average of 5.4 billion.